Kellogg MBA Students Learn Defense With ETFs and Blue Chips
Last spring, Robert Korajczyk, the Harry G. Guthmann Distinguished Professor of Finance at the Kellogg School of Management at Northwestern University launched a year-long course entitled Asset Management Practicum. Currently, enrolled students manage $2.7 million of Kellogg's endowment and rotate roles -- from analysts to hedge fund managers to traders to portfolio managers.
"It's really meant to give students an experience in investing that's difficult to get just through a textbook style class. So not only do they have to worry about which assets to hold and the risk of the portfolio but how do you trade the portfolio," says Korajczyk. Students are given 100% freedom, he says, in choosing what stocks and funds to trade in the class, which comprises four portfolios of different categories.
Blue Chips Over Hot TechThree out of the four portfolios have beaten the S&P 500 since the current students began managing the portfolios last April, he says. How? Most of the portfolios have a cash component, students say, along with a good number of exchange-traded funds like the Market Vectors Global Agribusiness ETF (MOO) and the iShares MSCI Emerging Market Index ETF (EEM), and value-oriented blue chips like Freeport-McMoRan Copper & Gold (FCX) and Nike (NKE). Students are not as interested as much in growth stocks or hot tech names like Google (GOOG), Baidu (BIDU) or Apple (AAPL), because their sense of the market right now is less than confident, they say. "People are being a little bit more defensive," says Kellogg student Ben Hockenberg, one of the 23 graduate students enrolled in the Asset Management Practicum. He and his classmates prefer "stocks that will be solid if the economy continues to weaken." One of Hockenberg's latest stock picks was The Goodyear Tire & Rubber Co. (GT). "[With Goodyear,] replacement tire purchases are somewhat elastic... If we end up going into somewhat of a recession , people need to still replace tires on their car," he explains.
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